[Code of Federal Regulations]
[Title 7, Volume 11, Parts 1600 to 1899]
[Revised as of January 1, 2000]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1610]
[Page 10-15]
PART 1610--LOAN POLICIES--Table of Contents
Sec.
1610.1 General.
1610.2 Definitions.
1610.3 Loan authorizations.
1610.4 Loan applications.
1610.5 Minimum Bank loan.
1610.6 Concurrent Bank and RUS cost-of-money loans.
1610.7 Acquisition of certain exchange facilities.
1610.8 Adoption of applicable RUS policy.
1610.9 Class B stock.
1610.10 Determination of interest rate on Bank loans.
1610.11 Prepayments.
Authority: 7 U.S.C. 941 et seq.; Pub. L. 103-354, 108 Stat. 3178 (7
U.S.C. 6941 et seq.).
[[Page 11]]
Source: 38 FR 17184, June 29, 1973, unless otherwise noted.
Editorial Note: Nomenclature changes to part 1610 appear at 59 FR
66439, Dec. 27, 1994.
Sec. 1610.1 General.
Loans made by the Governor of the Rural Telephone Bank (the
``Bank'') will be made in conformance with title IV of the Rural
Electrification Act of 1936 (the ``Act''), as amended (7 U.S.C. 941 et
seq.), and this part 1610. Loans are made under section 408(a)(1) of the
Act for purposes of section 201 of the Act. Loans are also made for
purposes of section 408(a)(2) of the Act. The Bank will give preference
to the use of loan funds for purposes set forth in section 408(a)(2) of
the Act to the extent that it has completed applications for such loans.
[38 FR 17184, June 29, 1973, as amended at 58 FR 66252, Dec. 20, 1993]
Sec. 1610.2 Definitions.
As used in this part:
Act means the Rural Electrification Act of 1936, as amended (7
U.S.C. 901 et seq.).
Appropriated means funds appropriated based on subsidy.
Bank means the Rural Telephone Bank, an agency and instrumentality
of the United States within the United States Department of Agriculture.
Borrower means any organization which has an outstanding telephone
loan made by the Bank or RUS, or guaranteed by RUS, or which is seeking
such financing.
Governor means the Governor of the Bank.
REA means the Rural Electrification Administration, formerly an
agency of the United States Department of Agriculture and predecessor
agency to RUS with respect to administering certain electric and
telephone loan programs.
RUS means the Rural Utilities Service, an agency of the United
States Department of Agriculture established pursuant to Section 232 of
the Federal Crop Insurance Reform and Department of Agriculture
Reorganization Act of 1994 (Pub.L. 103-354, 108 Stat. 3178), successor
to REA with respect to administering certain electric and telephone
programs. See 7 CFR 1700.1.
RUS cost-of-money-loan means a loan made under section 305(d)(2) of
the Act bearing an interest rate as determined under 7 CFR 1735.31(c).
RUS cost-of-money loans are made concurrently with Bank loans.
TIER (Times Interest Earned Ratio) means the ratio of the borrower's
net income (after taxes) plus interest expense, all divided by interest
expense. For the purpose of this calculation, all amounts will be annual
figures and interest expense will include only interest on debt with a
maturity greater than one year.
[58 FR 66252, Dec. 20, 1993, as amended at 59 FR 66439, Dec. 27, 1994]
Sec. 1610.3 Loan authorizations.
The aggregate amount of loans made will not exceed the amount
authorized by the Board of Directors (the ``Board'') of the Bank.
[38 FR 17184, June 29, 1973. Redesignated at 58 FR 66252, Dec. 20, 1993]
Sec. 1610.4 Loan applications.
No application for a loan will be considered for approval by the
Bank until it has been reviewed by RUS and the Governor has determined,
based on such review, the eligibility of the applicant for a Bank loan
and the amount thereof. Loan application forms are available from RUS on
request. No fees or charges are assessed for Bank loans.
[58 FR 66252, Dec. 20, 1993]
Sec. 1610.5 Minimum Bank loan.
A Bank loan will not be made unless the applicant qualifies for a
Bank loan of at least $50,000.
[38 FR 17184, June 29, 1973. Redesignated at 58 FR 66252, Dec. 20, 1993]
Sec. 1610.6 Concurrent Bank and RUS cost-of-money loans.
(a) The Bank makes loans, under section 408 of the Act, concurrently
with RUS cost-of-money loans made under section 305(d)(2) of the Act. To
qualify for concurrent Bank and RUS cost-of-money loans on or after
November 1, 1993, a borrower must meet each of the following
requirements:
[[Page 12]]
(1) The average number of proposed subscribers per mile of line in
the service area of the borrower is not more than 15, or the borrower
has a projected TIER (including the proposed loans) of at least 1.0, but
not greater than 5.0, as determined by the feasibility study prepared in
connection with the loans, see 7 CFR part 1737, subpart H; and
(2) The Administrator of RUS has approved and the borrower is
participating in a telecommunications modernization plan for the state,
see 7 CFR part 1751, subpart B.
(b) The loan amounts from each program (Bank, including amounts for
class B stock, and RUS cost-of-money) will be proportionate to the total
amount of funds appropriated for the fiscal year for Bank loans and RUS
cost-of-money loans. To determine the Bank portion, the total loan
amount will be multiplied by the ratio of Bank funds appropriated for
the fiscal year to the sum of RUS cost-of-money and Bank funds
appropriated for the fiscal year in which the loan is approved. The same
method would be used to calculate the RUS cost-of-money portion (see 7
CFR 1735.31(b)). If during the fiscal year the amount of funds
appropriated changes, the ratio will be adjusted accordingly and applied
only to those loans approved afterwards.
(c) The actual rate of interest on the Bank loan shall be determined
as provided in Sec. 1610.10; the RUS cost-of-money loan shall bear
interest at a rate equal to the current cost of money to the Federal
Government, on the date of advance of funds to the borrower, for loans
of similar maturity, but not more than 7 percent per year (see 7 CFR
1735.31(c)).
(d) Generally, no more than 10 percent of lending authority from
appropriations in any fiscal year for Bank and RUS cost-of-money loans
may be loaned to a single borrower. The Bank will publish by notice in
the Federal Register the dollar limit that may be loaned to a single
borrower in that particular fiscal year based on approved Bank and RUS
lending authority.
[58 FR 66252, Dec. 20, 1993, as amended at 62 FR 46869, Sept. 5, 1997]
Sec. 1610.7 Acquisition of certain exchange facilities.
In the interest of making optimum use of the Bank's loan funds, a
Bank loan for the acquisition of exchange facilities under section
408(a)(2) of the Act (7 U.S.C. 948(a)(2)) will not be recommended by the
Governor for approval by the Secretary of Agriculture unless the
Governor determines that the acquisition is reasonably necessary to
improve the efficiency, effectiveness, or financial stability of the
borrower's telephone system, that the location and character of the
proposed acquisition are such that the acquisition is reasonably
necessary to accomplish such improvement, and that the amount of the
requested loan for such acquisition is reasonably justified by the
nature and scope of the improvement which the acquisition would effect.
Sec. 1610.8 Adoption of applicable RUS policy.
The policies embodied in 7 CFR part 1610, in all parts of 7 CFR
chapter XVII except those identified below, will be utilized by the
Governor in carrying out the Bank's loan program to the extent that such
policies are consistent with title IV of the Act (7 U.S.C. 941 et seq.)
and to the extent that policies in 7 CFR chapter XVII are consistent
with 7 CFR part 1610. The parts of 7 CFR chapter XVII applicable solely
to the Electric Program and thus exceptions to this section are parts
1710 through 1734 inclusive.
[55 FR 39397, Sept. 27, 1990]
Sec. 1610.9 Class B stock.
Borrowers receiving loans from the Bank shall be required to invest
in class B stock at 5 percent of the total amount of loan funds
advanced. Borrowers may purchase class B stock by:
(1) Paying an amount (using their own general funds) equal to 5
percent of the amount, exclusive of the amount for class B stock, of
each loan advance, at the time of such advance; or
(2) Requesting that funds for the purchase of class B stock be
included in the loan. If funds for class B stock are included in a loan,
the funds for class B stock shall be advanced in an amount
[[Page 13]]
equal to 5 percent of the amount, exclusive of the amount for class B
stock, of each loan fund advance, at the time of such advance.
[56 FR 26596, June 10, 1991]
Sec. 1610.10 Determination of interest rate on Bank loans.
(a) All loan fund advances made on or after December 22, 1987 under
Bank loans approved on or after October 1, 1987, shall bear interest at
the rate determined as established below, but not less than 5 percent
per annum.
(b) The interest rate for the period beginning on the date the
advance is made and ending at the close of the fiscal year in which the
advance is made shall be the average yield on the date of advance on
outstanding marketable obligations of the United States having a final
maturity comparable to the final maturity of the advance. The interest
rate shall be determined to the nearest 0.01 percent.
(1) For this determination, the Bank will use yields on actively
traded Treasury issues adjusted to constant maturities obtained from the
Federal Reserve statistical release (``Treasury rate''). In accordance
with standard Treasury procedures, the rate in effect for any given day
is the rate set at the close of business on the preceding day. The 30-
year Treasury rate will be applied to all advances with a final maturity
of at least 30 years from date of advance. A straight-line interpolation
between other Treasury rates will be used to determine the rate
applicable for advances with final maturities of less than 30 years.
(2) The Bank will notify the borrower in writing of the interest
rate that applies to each advance.
(c) After the fiscal year in which the advance is made, the interest
rate applied to the advance will be the sum of the calculations made in
paragraphs (c) (1) through (5) of this section. This interest rate
determination shall be made by the Governor within 30 days of the end of
each fiscal year and shall be determined to the nearest 0.01 percent.
(1) The aggregate of all amounts received by the Bank during the
fiscal year from the issuance of Class A stock, multiplied by the rate
of return payable by the Bank during the fiscal year as specified in
section 406(c) of the Act, which product is divided by the aggregate of
the amounts advanced by the Bank during the fiscal year.
(2) The aggregate of all amounts received by the Bank during the
fiscal year from the issuance of Class B stock, multiplied by the rate
at which dividends are payable by the Bank during the fiscal year as
specified in section 406(d) of the Act, which product is divided by the
aggregate of the amounts advanced by the Bank during the fiscal year.
Section 406(d) provides that ``No dividends shall be payable on Class B
stock.'' The ``amounts received by the Bank during the fiscal year from
the issuance of Class B stock'' means the amount of cash received during
the fiscal year for the purchase of Class B stock, plus the amount
advanced to borrowers by the Bank during the fiscal year for such
purchases, less any Class B stock that is rescinded during the fiscal
year.
(3) The aggregate of all amounts received by the Bank during the
fiscal year from the issuance of Class C stock, multiplied by the rate
at which dividends are payable by the Bank during the fiscal year as
specified in section 406(e) of the Act, which product is divided by the
aggregate of the amounts advanced by the Bank during the fiscal year.
(4) The amounts received by the Bank during the fiscal year from
each issue of telephone debentures and other obligations of the Bank,
multiplied, respectively, by the rates at which interest is payable by
the Bank during the fiscal year to holders of each issue, each of which
product is divided, respectively, by the aggregate of the amounts
advanced by the Bank during the fiscal year.
(5) The amount by which the aggregate of the amounts advanced by the
Bank during the fiscal year exceeds the aggregate of the amount received
by the Bank from the issuance of Class A stock, Class B stock, Class C
stock, and telephone debentures and other obligations of the Bank during
the fiscal year, multiplied by the historic cost of money rate as of the
close of the immediately preceding fiscal year, which product is divided
by the aggregate of
[[Page 14]]
the amounts advanced by the Bank during the fiscal year.
(6) As used in paragraph (c)(5) of this section, the term ``historic
cost of money rate as of the close of the immediately preceding fiscal
year,'' means the sums of the results of the following calculations: The
amounts advanced by the Bank in each fiscal year during the period
beginning with fiscal year 1974 and ending with the immediately
preceding fiscal year, multiplied, respectively, by the cost of money
rate for the fiscal year (as set forth in Table I for fiscal years 1974
through 1987, and as determined by the Governor in paragraphs (c) (1)
through (5) of this section for fiscal years after fiscal year 1987),
with each product then divided by the aggregate of the amounts advanced
by the Bank from the beginning of fiscal year 1974 through the end of
the fiscal year just ended.
Table I
------------------------------------------------------------------------
The cost of money rate shall
For advances made in fiscal year: be:
------------------------------------------------------------------------
1974...................................... 5.01 percent.
1975...................................... 5.85 percent.
1976...................................... 5.33 percent.
1977...................................... 5.00 percent.
1978...................................... 5.87 percent.
1979...................................... 5.93 percent.
1980...................................... 8.10 percent.
1981...................................... 9.46 percent.
1982...................................... 8.39 percent.
1983...................................... 6.99 percent.
1984...................................... 6.55 percent.
1985...................................... 5.00 percent.
1986...................................... 5.00 percent.
1987...................................... 5.00 percent.
------------------------------------------------------------------------
In this table, ``fiscal year'' means the 12-month period ending on
September 30 of the designated year.
(d) A borrower with a Bank loan approved on or after October 1,
1987, and before December 22, 1987, and with funds not fully advanced as
of December 22, 1987, may until the next advance under the loan or March
21, 1988, whichever is later, elect to have the interest rate specified
in the loan commitment apply to the unadvanced portion in lieu of the
rate which would otherwise apply as set forth in Sec. 1610.10(a). A
borrower making such an election shall contact, in writing, the
applicable Area Office of RUS. The Governor shall then adjust the
interest rate that applies to the unadvanced portion of the loan
accordingly.
(e) If the Bank, pursuant to section 407(b) of the Act, issues
telephone debentures to refinance outstanding telephone debentures or
other obligations, the Bank shall reduce the interest rate charged on
each advance of Bank loan funds made during the fiscal year(s) in which
the refinanced debentures or other obligations were originally issued.
The reduction shall be for the period beginning on the issue date of the
refinancing debentures and ending on the date the advance matures or is
completely prepaid, whichever is earlier. This reduction shall be in
addition to any other interest rate reduction required by section
408(b)(3) of the Act. The interest rate shall be reduced by the amount
which fully reflects that percentage of the funds saved by the Bank as a
result of the refinancing which is equal to the percentage
representation of the advance of all advances made during the fiscal
year(s) involved. In no case, however, shall the interest rate be
reduced to less than 5 percent per annum. The interest rate reduction
for each advance shall be determined as follows:
(1) The funds saved by the Bank as a result of the refinancing shall
be computed.
(2) The advance shall be divided by the total of all advances made
during the fiscal year(s) involved, and stated to the nearest .01
percent.
(3) The percentage in paragraph (e)(2) of this section is multiplied
by the amount in paragraph (e)(1) of this section to determine the
savings for a particular advance. The interest rate on that advance is
then reduced to fully reflect the savings over the remaining
amortization period of the loan from which the advance was made.
(f) Within 60 days after the issue date described in paragraph (e)
of this section, the Governor shall amend the loan documentation for
each advance described in paragraph (e) of this section, as necessary,
to reflect any interest rate reduction applicable to the advance by
reason of paragraph (e) of this section, and shall notify each affected
borrower of the reduction.
(g) Within 5 days of determining the cost of money rate for a fiscal
year, the Governor shall:
[[Page 15]]
(1) Cause the determination to be published in the Federal Register
in accordance with section 552 of title 5, United States Code, and
(2) Furnish a copy of the determination to the Comptroller General
of the United States.
(h) A borrower should not wait until the end of the fiscal year to
submit a requisition for an advance of loan funds if it wants the
advance made in that fiscal year. Borrower requisitions submitted late
in the fiscal year may not be processed in that fiscal year because of
workload and other factors.
[53 FR 36783, Sept. 22, 1988; 53 FR 39014, Oct. 4, 1988]
Sec. 1610.11 Prepayments.
(a) Bank loans approved before November 1, 1993, may be prepaid in
accordance with the terms thereof, including payment of the premium as
provided therein.
(b) A borrower may prepay part or all of a Bank loan made on or
after November 1, 1993, by paying the outstanding principal and any
accrued interest without being required to pay a prepayment premium.
(c) Borrowers that qualify to issue a refunding note or notes in
accordance with 7 CFR 1735.43, Payments on loans, shall not be required
to pay a prepayment premium on all payments made in accordance with the
new payment schedule.
[58 FR 66252, Dec. 20, 1993, as amended at 62 FR 46869, Sept. 5, 1997]
[[Page 17]]